Northampton Town: £10m loan 'misappropriated' by developers

Northampton Town was loaned £10.25m but work on the East Stand ceased last year

Millions of pounds of taxpayers' money intended for a football stadium redevelopment was "misappropriated" by developers, according to claims made in documents seen by the BBC.

Northampton Borough Council lent Northampton Town FC £10.25m for the work, none of which has been completed.

High Court papers contain allegations developer Howard Grossman and his associates used a "substantial part" of the money for unrelated purposes.

They have denied the claims.

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A criminal inquiry is already under way into "alleged financial irregularities" surrounding the council's loan to Northampton Town, known as the Cobblers.

Former club chairman David Cardoza was arrested last week as part of the investigation which police say is ongoing.

The allegations about County Group, the trading name of companies owned by Mr Grossman, were made in papers filed at the High Court in November 2014.

David Cardoza was arrested as part of a police investigation into the loan

A hotel and conference centre were also due to be built on land surrounding the stadium

The League Two club, of which Mr Cardoza was chairman, initiated legal action to establish what had happened to the loan money and to try to recover it after contractors were not paid.

Mr Grossman was a director of the company 1st Land Ltd, which was set up to carry out the refurbishment of parts of Sixfields Stadium and land adjacent to the ground - work that included a new stand, hotel and conference centre.

Approximately £8.75m of the council's money was transferred to 1st Land.

Where did the £10.25m loan go?

• £8.75m was transferred by Northampton Town Football Club to 1st Land Ltd and County (Oundle) Ltd, both owned by Howard Grossman.

Of which:

• £2.28m (estimated) to suppliers and contractors, including £491,000 to stadium builders Buckingham Group and £986,000 to Synergy Property Design Consultants

• £2.05m to Mr Cardoza's father, Anthony

• £1.475m to County Homes (Herts) Ltd, whose current and former directors include Howard Grossman and Stephen Hewitt

• £1.09m to Marcus Grossman, Simon Patnick and Stephen Hewitt in "consultancy fees"

• £600,000 to rebuild David Cardoza's house

• £314,000 to Howard Grossman as a fee

• £233,000 to County Cemetery Services Ltd, whose current and former directors include Marcus Grossman, Simon Patnick and David Cardoza. Shareholders included Anne Patnick, Steve Allan, Keith Western, Paula Etti, Christina Cardoza and Rita Cardoza. Its assets were sold to Centurion Infinity Ltd, whose current and former directors include Marcus Grossman, Simon Patnick and Gary Robert Platt

Source: Analysis based on administrator's documents and other papers obtained by the BBC

In the High Court documents, Howard Grossman was accused of "dishonest association". It was claimed his associates Marcus Grossman, Simon Patnick and Stephen Hewitt were paid £1.09m and that Howard Grossman sought to "disguise this misappropriation of trust money by labelling these transfers as consultancy payments".

In a witness statement, Howard Grossman denied the allegations, describing them as "outrageous and deeply offensive".

The claim was settled out of court and the parties signed a non-disclosure agreement.

Through their solicitor, Mr Patnick, Marcus Grossman and Mr Hewitt said the payments were for "legitimate services to the company as consultants".

Police took bags of paperwork from Sixfields as part of their investigation

One of the court papers called the particulars of claim describes how the County Group was appointed by Northampton Town (NTFC) to carry out the loan negotiations on its behalf with Northampton Borough Council (NBC), and arrange for that money to be paid to the borrower.

It describes how Howard Grossman, Marcus Grossman and Simon Patnick "arranged for monies to be paid by NBC to the County Group via NTFC at a time when such monies were not contractually due to County Group".

The BBC has also seen a valuation sent on behalf of 1st Land Ltd to the football club in August 2014, detailing the cost of work carried out on the Sixfields development, as part of an application for further payment.

Mr Cardoza is quoted in Mr Grossman's witness statement as having alleged this document was "bogus, dishonest and false".

Mr Grossman, on the other hand, says it was a "bona fide application", adding "it is not appropriate for me to explain in detail how the money provided on account has been spent".

Plans for a 2,000 capacity East Stand were announced in October 2013

Two investigations are also looking into how Northampton Borough Council made the decision to lend the football club money, which was then passed on to 1st Land Ltd.

The High Court document describes how Mr Cardoza and his father Anthony worked out a plan with the County Group to develop the ground and its adjoining land at a meeting in Bordeaux in June 2013.

It describes an agreement to pay the club between £1.5m and £2m and for David Cardoza's house to be demolished and rebuilt.

Mr Grossman, in his witness statement, said Anthony Cardoza was given £2.05m by 1st Land, describing this as a loan. David Cardoza, however, called it "key money".

Both David and Anthony Cardoza could not be reached for comment. Last week David Cardoza was arrested and released on bail. Police say the investigation is ongoing.

Following his takeover of the club in November, Kelvin Thomas said a memorandum of understanding was in place over the unpaid loan.

It would see the debt wiped out, with the council acquiring land near Sixfields for development in return.

The council and the football club

Former council leader David Mackintosh became the Conservative MP for Northampton South in May 2015

• September 2013: Northampton Borough Council agrees to loan League Two Northampton Town £10.25m towards the redevelopment - £8.75m is passed on to the developer Howard Grossman.

• November 2014: Northampton Town Football Club Ltd lodges Particulars of Claim at the High Court against Howard Grossman and business associates. The case is settled out of court.

• May and June 2014:Three payments of £10,000 are made to former council leader David Mackintosh's general election fighting fund via his local Conservative Association in Northampton.

Payment 1: Al Mayfield, a DJ and hypnotherapist and Grossman family friend. Mr Mayfield did not respond to BBC calls.

Payment 2: Gary Robert Platt. Documents filed at Companies House show Mr Platt was a director of a firm which lists two employees of Mr Grossman's County Group as co-directors. The BBC has been unable to contact Mr Platt.

Payment 3: Leonard Western, also known as Keith Western, was a shareholder in County Cemetery Services Ltd, which received some of the football club loan money. The BBC has been unable to contact Mr Western.

• May 2015: David Mackintosh is elected MP for Northampton South.

Mr Mackintosh says when leader of the council he was a "formal consultee" on the loan but the final decision was made "on the advice of the officers who hold legal responsibility and negotiated the details of the loan".

He said: "I believe the negotiations were carried out with David Cardoza but I am not sure who else was involved from the football club as I did not attend the meetings.

"Northampton Borough Council did not have a direct relationship with Howard Grossman in relation to the loan. I was first introduced to Howard Grossman and his associates by David Cardoza at the time when officers of Northampton Borough Council were discussing the details of the development."

He said of the payments to his election fund: "All donations to the election campaign were correctly declared in line with Electoral Commission rules, save one donation in April 2014."

He said this was an administrative error which has been rectified.

For more on this story, watch Inside Out on BBC One East at 19:30 on Monday 1 February, and nationwide for 30 days thereafter on the iPlayer.